The tax consequences of buying a double cab pickup

How a double cab pickup is taxed

The quick answer is that as long as the vehicle can be classified as primarily a goods vehicle, it can be beneficial to be owned by the limited company. If it is classified as a car it generally is not beneficial and should be purchased privately instead.
The magic number for a double cab pickup is to be classified as a commercial vehicle is a payload of over 1 tonne. As far as HMRC is concerned, over 1 tonne and it’s a commercial vehicle; less than 1 tonne and it’s a car! One point to consider is if you add a cover to the pickup area this will reduce the weight capacity and may reduce it below 1 tonne and in it would be treated as a car.
(Note this is JUST for double cab pickups – other hybrid car/van vehicles such as car-derived vans or combis have different rules).
Provided you are looking at a commercial vehicle, there are 3 types of tax affected.

Corporation tax

As long as the payload is greater than 1 tonne then a double cab pickup is treated as a commercial vehicle for corporation tax. This is good news as you will have a 100% deduction of the cost of the pickup in the first year. (i.e. it will reduce your taxable profits by the net cost of the pickup – saving you tax equal to at least 19% of the net cost of the pickup).  This is much more favourable than the treatment for cars which would likely be 6% per year on a reducing balance basis.

Benefit in kind P11d

As above, as long as the payload is greater than 1 tonne the pickup is treated as a van for benefit in kind.  This means that if there is any private use of the vehicle it is taxed at a flat rate; for 23/24 the flat rate benefit of a van is £3,960. (This is cheap compared to cars which are based on their list price when new and CO2 emissions).  The value of the benefit is taxed as if you had a salary of the same amount; So you pay tax and national insurance on it and the company pays national insurance on it.  If you are not using the vehicle for private journeys (other than home to work) then there is no benefit in kind. If you are using the vehicle for private journeys then there will be a benefit in kind charge. If the company also pays for the private fuel there is a further benefit in kind charge called fuel benefit.

VAT

As above, if the vehicle qualifies as a commercial vehicle then the VAT can be reclaimed through your VAT return. Note that you should reduce the VAT claim for any private use that is intended.  VAT is generally not recoverable on cars, except under very limited circumstances!

Other benefits

If the vehicle is owned by the business, the tax, insurance, maintenance and business fuel can also go through the business. Otherwise, you will need to pay for those things privately and charge mileage to the business at a rate of 45p per mile for the first 10,000 miles.

Possible snags

You must make sure everything is done in the company name and not your personal name. For example VAT inspectors often ask for a copy of the invoice and the business name must be on it in order to claim the VAT. The same follows for the other taxes.

Financing?

There are a number of ways to finance a vehicle purchase, and some of these entirely change the way that the vehicle is taxed for corporation tax and VAT. HP is generally a safe option, however there are other lease financing options where, for example, it is the finance company that owns the vehicle; VAT can’t be claimed as the VAT invoice is in the finance company name, and capital allowances can’t be claimed for corporation tax. If you are thinking about financing via a lease agreement, it’s best to check the particular agreement with us.

Timing

If you think you will take the plunge and get the pick up within the next few months. If you can try and get it before your year end you will reap the corporation tax benefit a whole year sooner than leaving it until just after the year end.